Old vs New Tax Regime: Why can the old tax regime be more beneficial for you? Know the reason..

Old vs New Tax Regime: If you are a job holder and think about tax every year, whether to choose the Old Tax Regime or the New Tax Regime, then this news is useful for you. The government implemented the New Tax Regime from the year 2020, which has low tax rates but does not give many exemptions. At the same time, in the Old Tax Regime, you get the full benefit of income tax exemptions and tax savings.

In such a situation, for those taxpayers whose tax planning is already done, Old Tax Regime Benefits can still be a better option.

1. If you claim most tax exemptions and savings

If you invest in Employees Provident Fund (EPF), Public Provident Fund (PPF), LIC premium, home loan principal, or Equity Linked Saving Scheme (ELSS) under Section 80C, then you get a discount of up to Rs 1.5 lakh in the Old Tax Regime. Apart from this, allowances like section 80D (health insurance), section 24 (b) (home loan interest), and HRA are also included in tax exemption. If you are taking advantage of all these, then moving to the new tax regime can increase your tax.

2. If you have a home loan or you live in a rented house

Home loan takers get a big benefit in the old tax regime. You can get an exemption on interest up to Rs 2 lakh and claim the principal amount in 80C. On the other hand, people living on rent can take advantage of the HRA allowance. All these exemptions are not available in the new tax regime.

3. When your salary includes allowances and exemptions

Most salaried people get allowances like HRA, LTA (leave travel allowance), conveyance allowance, and professional tax. These reduce the taxable income in the old tax regime. But there is no exemption on these in the new tax regime, due to which your tax can be higher.

4. When you want freedom and flexibility in tax planning
The old tax regime is better for those taxpayers who like to invest with planning. In this, you can save tax and also make a financial plan through long-term tools like PPF, ELSS, and NPS. At the same time, the new tax regime is simple, but there is no incentive for tax savings in it.

Is the old tax regime a profitable deal?
The simplicity and low rates of the new tax regime may seem attractive, but if you invest in tax-saving instruments, pay a home loan or your salary has more exempted components, then the old tax regime is more profitable. Before choosing the right option for you, do a complete calculation once.

Disclaimer: This content has been sourced and edited from NDTV India. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.